AT&T Announces Structured Sale-Leaseback of Real Estate to Development Firm Reign Capital

Rhea-AI Summary

AT&T (NYSE: T) has completed a structured sale-leaseback transaction with Reign Capital, involving 74 properties across the country totaling over 13 million square feet. The deal, closed on January 8, 2025, generates more than $850 million in upfront cash proceeds for AT&T and includes future revenue sharing from redevelopment opportunities.

The transaction involves underutilized central office facilities originally built for legacy copper networks. As AT&T transitions to fiber and wireless technology, these facilities require less space due to more efficient equipment. The company will lease back only the necessary space for network operations, maintaining operational control of critical infrastructure while reducing its real estate footprint.

This deal follows a similar 2021 transaction with Reign Capital involving 13 properties and 3 million square feet, which generated over $300 million in cash. AT&T plans to exit the majority of its legacy copper network operations by the end of 2029.

Positive

• Generates $850 million in immediate cash proceeds
• Includes revenue sharing from future property redevelopment
• Reduces operating costs through smaller real estate footprint
• Maintains control over critical network infrastructure
• Serves as template for potential future real estate monetization

Negative

• Requires ongoing lease payments to Reign Capital
• Represents partial divestment of company-owned real estate assets

Insights

Financial Analyst

This sophisticated real estate transaction marks a significant strategic move for AT&T, effectively monetizing 74 properties spanning 13 million square feet for $850 million in immediate cash proceeds. The deal's structure is particularly noteworthy for three key aspects:

1. Operational Efficiency: The sale-leaseback arrangement strategically aligns with AT&T's network modernization, as the transition from copper to fiber networks reduces space requirements. This optimization should lead to substantial operational cost savings through reduced maintenance, utilities and property management expenses.

2. Financial Impact: The transaction strengthens AT&T's balance sheet without compromising operational control. The $850 million cash injection provides immediate financial flexibility, while the revenue-sharing mechanism from future redevelopment creates an additional value stream. Based on the previous 2021 transaction's metrics ($300 million for 13 properties), this deal appears to maintain similar favorable valuations.

3. Strategic Positioning: This transaction serves as a blueprint for future asset optimization, particularly relevant as AT&T aims to exit majority copper network operations by 2029. The company retains approval rights over redevelopment plans, ensuring network infrastructure protection while participating in property value appreciation.

The deal's structure effectively transforms fixed assets into liquid capital while maintaining operational flexibility - a important balance for telecommunications infrastructure. The revenue-sharing component provides upside potential without the operational burden of property management, representing a sophisticated approach to capital allocation and asset monetization.

Real Estate Investment Analyst

This transaction exemplifies an innovative approach to unlocking value from legacy telecommunications real estate, with several notable implications:

Market Innovation: The deal structure represents a sophisticated evolution in sale-leaseback arrangements, particularly in the telecommunications sector. By retaining redevelopment approval rights and revenue participation while transferring property management responsibilities, AT&T has effectively created a hybrid model that could become an industry standard.

Valuation Metrics: At approximately $65 per square foot (based on 13 million square feet), the valuation appears attractive given the properties' potential for redevelopment and their typically prime urban locations. The previous 2021 transaction's success ($100 per square foot) suggests strong redevelopment potential for these assets.

Future Opportunities: With AT&T's extensive real estate portfolio and ongoing network modernization, this transaction could serve as a template for future deals. The revenue-sharing mechanism provides exposure to real estate market appreciation without the associated management costs, creating an attractive risk-adjusted return profile for both parties.

DALLAS, Jan. 24, 2025 /PRNewswire/ -- Pioneering transaction monetizes properties with development potential, reduces operating expenses, and provides revenue sharing

Key Takeaways:

• Unlocks value in company-owned properties originally constructed for legacy network equipment
• AT&T realizes more than $850 million in upfront cash proceeds from the asset transfer of 74 properties located across the country
• Unique deal structure preserves the necessary infrastructure requirements to keep the network running smoothly, plus participation in future revenue generated from redevelopment

As part of its legacy network transformation, AT&T Inc. (NYSE: T) completed a structured sale-leaseback of underutilized central office facilities with private real estate development firm Reign Capital.

The transaction, which closed on Jan. 8, includes the asset transfer of 74 properties, located across the country, encompassing over 13 million square feet of space. The transaction generates more than $850 million in upfront cash proceeds for AT&T through a unique deal structure that enables future profit sharing from redevelopment opportunities.

"The uniquely structured deal unlocks value in otherwise stranded commercial real estate space," said Michael Ford, head of global real estate, AT&T. "It's a creative solution providing both upfront and long-term value through a revenue sharing model that fits with our broader company and transformation initiatives."

Central offices were originally built to house and connect large, bulky, and energy-intensive equipment for outdated copper networks. As customers move from copper to fiber and wireless, a smaller, more efficient equipment footprint is managing the network. This technology evolution not only reduces power consumption, benefitting the environment, but also lowers operating costs and frees up valuable real estate for other uses.

Terms and Protections

This model not only monetizes real estate assets as AT&T plans to exit the large majority of its legacy copper network operations by end of year 2029, but it also aligns with the company's strategic capital allocation priorities.

By leasing back only space that is needed for the network, AT&T is streamlining its real estate footprint. AT&T will make lease payments to Reign Capital for the duration of the lease term and maintain exclusive operational control of space required for access to communications infrastructure in each location.

This transaction impacts only a small portion of AT&T's portfolio of central offices. It has no impact on jobs or changes in the services we offer customers.

Redevelopment Value

The agreement includes provisions for financial participation in redevelopment revenues, ensuring long-term benefits from future property value increases. AT&T retains final redevelopment plan approvals to ensure network infrastructure and operations remain undisturbed.

The structure also serves as a template for potential future transactions for some locations in AT&T's footprint and is just one way the company intends to realize cost savings from legacy transformation.

In 2021, AT&T successfully executed a similar but smaller real estate transaction with Reign Capital, involving 13 properties covering over 3 million square feet. That deal generated more than $300 million in upfront cash with initial redevelopment revenue generation projected to begin in 2025.

About AT&T

We help more than 100 million U.S. families, friends and neighbors, plus nearly 2.5 million businesses, connect to greater possibility. From the first phone call 140+ years ago to our 5G wireless and multi-gig internet offerings today, we @ATT innovate to improve lives. For more information about AT&T Inc. (NYSE:T), please visit us at about.att.com. Investors can learn more at investors.att.com.

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SOURCE AT&T

FAQ

How much cash did AT&T (T) receive from the 2025 real estate sale-leaseback deal?

AT&T received more than $850 million in upfront cash proceeds from the sale-leaseback transaction with Reign Capital.

How many properties were included in AT&T's 2025 sale-leaseback transaction?

The transaction included 74 properties across the country, encompassing over 13 million square feet of space.

When will AT&T (T) exit its legacy copper network operations?

AT&T plans to exit the large majority of its legacy copper network operations by the end of 2029.

What was the value of AT&T's previous 2021 real estate deal with Reign Capital?

The 2021 deal involving 13 properties generated more than $300 million in upfront cash for AT&T.

Will AT&T's 2025 real estate transaction affect customer services or jobs?

According to AT&T, the transaction will have no impact on jobs or changes in the services offered to customers.